UBS: Raises KUAISHOU-W's (01024) target price to 70 Hong Kong dollars, first quarter performance in line with expectations.

UBS released a research report stating that KUAISHOU-W (01024) performed in line with expectations in the first quarter of this year, with the commercial performance of Kling being the main highlight. Its first-quarter revenue accelerated by over 90% quarter by quarter to over 650 million RMB, exceeding the bank's and market's expectations. Given the valuation uplift of Kling, the bank used the Sum of the Parts (SOTP) method to raise Kuaishou's target price from HK$68 to HK$70 and maintained a "buy" rating. In addition, the annualized revenue run rate (ARR) of Kling AI in March was close to 500 million US dollars, more than four times higher than the same period last year. Management's positive attitude towards the commercialization of Kling and the recent increase in ARR are encouraging, leading to an upward revision of Kling's second-quarter revenue forecast to 840 million RMB. UBS pointed out that Kuaishou's total revenue in the first quarter increased by 3% year on year to 33.716 billion RMB, in line with expectations. Advertisements and other services increased by 9.3% and 15.9% respectively. The bank believes that the market's conservative expectations of Kling-related cost growth have already been reflected in the stock price. The bank maintains a positive view on Kuaishou primarily because its strategy of actively seizing market share is correct, its valuation is attractive, and the profit impact brought by Kling has been digested by the market.